Related papers: Shadow price in the power utility case
This paper presents a derivation of the explicit price for the perpetual American put option in the Black-Scholes model, time-capped by the first drawdown epoch beyond a predefined level. We demonstrate that the optimal exercise strategy…
We consider the problem of determining an optimal strategy for electricity injection that faces an uncertain power demand stream. This demand stream is modeled via an Ornstein-Uhlenbeck process with an additional jump component, whereas the…
We propose a novel Black-Scholes model under which the stock price processes are modeled by stochastic differential equations driven by sub-diffusions. The new framework can capture the less financial activity phenomenon during the bear…
This paper considers the problem of shaping agent utility functions in a transactive energy system to ensure the optimal energy price at a competitive equilibrium is always socially acceptable, that is, below a prescribed threshold. Agents…
Electricity prices in liberalized markets are determined by the supply and demand for electric power, which are in turn driven by various external influences that vary strongly in time. In perfect competition, the merit order principle…
We study the price impact of storage facilities in electricity markets and analyze the long-term profitability of these facilities in prospective scenarios of energy transition. To this end, we begin by characterizing the optimal operating…
In this paper, we study decentralized decision-making where agents optimize private objectives under incomplete information and imperfect public monitoring, in a non-cooperative setting. By shaping utilities-embedding shadow prices or…
Users can now give back energies to the grid using distributed resources. Proper incentive mechanisms are required for such users, also known as prosumers, in order to maximize the sell-back amount while maintaining the retailer's profit.…
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…
We study buyer-optimal procurement mechanisms when quality is contractible. When some costs are borne by every participant of a procurement auction regardless of winning, the classic analysis should be amended. We show that an optimal…
To study the assumption that the utility maximization hypothesis implicitly adds to consumer theory, we consider a mathematical representation of pre-marginal revolution consumer theory based on subjective exchange ratios. We introduce two…
If you recommend a product to me and I buy it, how much should you be paid by the seller? And if your sole interest is to maximize the amount paid to you by the seller for a sequence of recommendations, how should you recommend optimally if…
In this paper we introduce the problem of dynamic pricing of power for smart-grid networks. This is studied within a network utility maximization (NUM) framework in a deterministic setting with a single provider, multiple users and a finite…
Black-Scholes implied volatility is a quantile. The insight follows from the normalized option price being a probability on the variance scale, with the inverse Gaussian distribution providing the link. It enables analytically exact and…
Cosmic expansion is expected to influence on the size of black hole shadow observed by comoving observer. Except the simplest case of Schwarzschild black hole in de Sitter universe, analytical approach for calculation of shadow size in…
We consider conditional-mean hedging in a fractional Black-Scholes pricing model in the presence of proportional transaction costs. We develop an explicit formula for the conditional-mean hedging portfolio in terms of the recently…
It is shown that the dual to the linear programming problem that arises in constraint-based models of metabolism can be given a thermodynamic interpretation in which the shadow prices are chemical potential analogues, and the objective is…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
This paper develops a feature-driven model for hybrid power plants, enabling them to exploit available contextual information such as historical forecasts of wind power, and make optimal wind power and hydrogen trading decisions in the…
In this work, we give a generalized formulation of the Black-Scholes model. The novelty resides in considering the Black-Scholes model to be valid on 'average', but such that the pointwise option price dynamics depends on a measure…